The Dow Jones Industrial Average soared 658 points today, as investors responded favorably to earnings reports and as members of the Fed's rate-setting committee made comments that were less hawkish than investors had feared.

Several major banks reported favorable earnings today, which showed that consumers and businesses stayed strong in the second quarter of this year, which ended in June. UnitedHealth Group (UNH -0.57%) finished atop the Dow, with shares gaining nearly 5.5%. The company reported earnings that beat analyst estimates and also raised its full-year guidance.

Furthermore, Fed Gov. Christopher Waller and St. Louis Fed President James Bullard, two Fed members that typically lean toward the hawkish side of the spectrum, said they support a three-quarter percentage-point rate increase at the Fed's meeting later this month. After a red hot inflation report earlier this week, investors feared a hike of a full percentage point might be coming.

Aside from UnitedHealth, there was a clear theme in stocks that investors bought today that helped drive the Dow's big day.

Banks gain today

After strong earnings reports from Citigroup (C -1.70%)Wells Fargo (WFC -0.39%), and other regional banks, bank stocks in the Dow took off and ended the day as three of the Dow's top four finishers.

JPMorgan Chase (JPM -6.47%) finished the day 4.6% higher after the stock sold off yesterday. JPMorgan reported second-quarter earnings results yesterday that missed analyst estimates. Furthermore, the bank suspended share repurchases because it needs to build capital to prepare for higher expected regulatory capital requirements in 2023 and 2024. 

Still, JPMorgan reported that through the second quarter, the consumer and commercial customers remained healthy, a theme driven home in bank earnings reports today.

The large investment bank Goldman Sachs (GS -2.01%) finished 4.4% higher, clearly riding the bank earnings wave. Investors have been concerned about Goldman's upcoming earnings because investment banking revenue has come in softer for banks this quarter. But trading revenue has been strong, as was consumer lending, perhaps assuaging investors' fears. Goldman will report Monday.

Finally, the credit card and payments company American Express (AXP) rose 4.4% today, with investors clearly optimistic about its upcoming earnings.

Credit card growth came in extremely strong in Q2. JPMorgan reported credit card balances up 9% from the first quarter, while Citigroup saw branded card balances rise 4% from the first quarter.

Buy bank stocks?

After the sell-off this year, I am a fan of the banking sector and do think investors should consider JPMorgan Chase, Goldman, and American Express. Banks are about to enjoy the fastest rising interest rate environment since the Great Recession, which should help their loan businesses to flourish.

While a recession would not be great for the sector, JPMorgan Chase CEO Jamie Dimon noted that consumers would be entering one with less leverage and in better shape than either the Great Recession or the pandemic.

Banks have also built significant levels of capital and should be able to withstand a recession, which is why I like the risk-reward in the sector right now.